What’s Next For Natural Gas and UNG?
20. Aug, 2009 
6 Comments
Natural gas futures and UNG, an ETF that is designed to track the movements of natural gas price, have been brutally damaged in the recent weeks. It seems like the UNG appetite has been increasing more and more as the price continues its downward movement. UNG is now faced with 10 consecutive days in which its stock price closed lower than its opening price. Furthermore, 9 of the last 10 days closed lower than the previous day’s close, now closing at an all-time low. It’s just ugly.
Here’s the current chart on natural gas futures and UNG:
Source: http://www.wtrg.com/
UNG Chart 8-20-09
Now, there’s one guy who has been getting a lot of attention, good or bad, due to his recent accumulation of UNG. For the last week, one of StockTwits‘ “Top Data Junkies” @wsmco has been buying up UNG and confidently broadcasting it on StockTwits. As a result, looks like he’s been feeling some heat from those who listened to his recommendation and bought UNG themselves.
So, where’s UNG going? Well, the technicals are just straight-up ugly. Clearly in an long-term bearish trend, it’s now sitting at an all time-low with no support below. However, the seasonal trend would suggest that the gas futures will go up in Q4 as shown below on the chart.
Natural Gas Seasonal Chart Source: Technical Commodity Trader
So what do the pros think? Well, @wsmco’s site Wall Street Media posted a good video on UNG discussion with Todd Sullivan. According to Todd:
You can’t have natural gas around $3 and have any kind of economic recovery what-so-ever. The math just doesn’t work. This winter, same time next year, I don’t see how it wouldn’t be sitting at 6, 7, 8, 9 dollars.
There’s also another expert who has a bullish sentiment on gas. Chris Nelder, an energy expert, stated it best.
Climate change concerns will lend further support to gas demand. As carbon emissions start coming with a price attached, cleaner-burning gas will be increasingly favored over coal for fueling power plants. Many newer plants use dual-fuel designs, enabling them to switch readily to whichever fuel is cheapest. As the hidden subsidy of externalized emissions costs is taken away from coal, gas will be cheaper, and it will stay cheaper.
The vehicle angle is another hugely bullish factor for gas, but so far the markets don’t seem to have discounted it at all.
As I have often suggested, the combined virtues of lower emissions, an inexpensive and large domestic supply, and its suitability as a bridge fuel to wean us away from oil will prove irresistible to policymakers, particularly as we begin to feel the effects of peak oil. Accordingly, a raft of new gas legislation is now working its way through Congress.
Another reason to start getting bullish is the extremely bearish gas sentiment itself. We haven’t seen gas prices stay this low in years, and gas continues to trade at an historically low price relative to oil on an energy basis. As Warren Buffett likes to say, “Be fearful when others are greedy, and be greedy when others are fearful.”
Natural gas under $4 was a steal in April, and it’s even more of a steal now. Ignore the nattering nabobs of natty who worry on about inventory numbers; that’s all noise. Lift your eyes from your shoes to the horizon, and you’ll see that there’s only one direction that gas prices can go over the coming year, and that’s up.
I agree: Logic will prevail, I would rather buy NG here at these low levels rather than when Ng rallies up 50% which is only a matter of a short time.
This past Friday's strength is interesting..love to see where next week goes w/ UNC
UNG seems to be a good play right now. UNG has seen it's low
for the year last week. If a smart person were to get into the
market…now would be the time to buy UNG. It will only go up.
Demand will be strong considering we are coming into the fall
and winter months as well as Congress identifying natural gas
as a logical resource to tap…it is so much cleaner than oil or
coal. We have reserves that can maintain our lifestyles at a
reasonable rate. Watch it rise !
So as a natterring nabob Id like to see where you are at now Honestly, now Im really commited (at this level Its REALLY a steal No? j.i.m.
So as a natterring nabob Id like to see where you are at now Honestly, now Im really commited (at this level Its REALLY a steal No? j.i.m.